Inflating capitalization by market makers (MM) and project teams is pure mathematics and psychology turned into art. The main secret of the crypto market lies in the fact that the capitalization figure on CoinMarketCap has nothing to do with the amount of real money inside the project.
Capitalization is calculated using a primitive formula:The price of the last tokenรNumber of coins in circulation (Circulating Supply)
To draw a beautiful figure of hundreds of millions of dollars, a market maker does not need to put these hundreds of millions into the project. It's enough to pull off a few clever schemes.
Mechanics of "Empty glass" and low supply (Low Float / High FDV)This is the most popular scheme for launching projects on Binance Alpha and other launchpads.How it works: The project issues 1 billion tokens, but throws only 5% (50 million coins) onto the market on the first day. The remaining 95% is blocked from investors and the team for a couple of years.MM's actions: The market maker has full control over these 5% of the coins. Due to the fact that there are very few coins on the market, there are almost no sell orders in the stock market.Result: MM spends only $50,000 โ $100,000 of his own money to buy back the entire empty glass with one button and raise the price of the token, for example, from $0.01 to $2.00.The magic of numbers: The price of the last transaction is now $2. A total of 1 billion coins have been issued. The CoinMarketCap screen instantly explodes with the news: "Project capitalization (FDV) is $2 billion!". The project is among the top 50 cryptocurrencies in the world, although there is little real liquidity in it.
Wash Trading (Fictitious trading Volume)Ordinary people (hamsters) do not buy coins that are standing still and for which there is no bidding. Investors need charts where everything is flying and "bustling with life."How it works: MM connects special trading robots (bots) to the exchange API.MM's actions: The bot of the market maker places a purchase order at the price of $1.00 and in the same millisecond, the second bot of the same market maker sells him this token at the same price of $1.00. The money is simply transferred from the left pocket to the right.The result: Robots spend a couple thousand dollars back and forth millions of times a day. Statistics light up on the stock exchange: "Trading volume in 24 hours is $50,000,000!". Ordinary traders see a huge interest in the coin, their FOMO turns on, and they begin to enter into real transactions, pushing the price and capitalization up at their own expense.
Manipulation of derivatives (Futures)As soon as MM has dispersed the spot price and drawn capitalization, futures are opened on the exchange. This is the end of the scheme.MM's actions: Knowing that the coin is a dummy with a drawn capitalization, MM begins to open short positions on futures. At the same time, in the spot market, it artificially keeps the price high so that retail traders continue to believe in the rocket and open long positions.Result: When there are enough longs from hamsters, MM simply stops supporting the spot glass with its money. The spot price is falling like a stone, capitalization is blown away by 90% per day. There is a cascade of liquidations of longists on futures, and MM takes millions of real dollars from its short position.
Creating the illusion of scarcity (Staking)In order for capitalization not to fall, MM needs people not to sell coins.How it works: A staking program is launched at a huge percentage (for example, 150% per annum). Hamsters lock their tokens for 3-6 months for the sake of free coins.The result: The free supply on the market drops to almost zero. MM, it becomes even easier to manipulate the price in an empty glass and inflate the capitalization to the skies, while the tokens of ordinary people are firmly blocked.
They will create the appearance of frenzied demand, draw volumes with bots, drive the price up, and when retail investors run to buy the token in the hope of a "new Solana," MM will cash out its drawn capitalization in real USDT.Your task in this system is just to have time to lock in the profit along with MM on the hype before they click the "Merge" button.
